Monday, October 20, 2014

Almost four years ago, I asked whether the U.S. was in for a labor market slump similar to the slump experience in Canada during the 1990's. Evidently, the answer turned out to be yes.

How is the U.S. faring relative to Canada back then? American prime-age males seem to be tracking their Canadian counterparts, both in terms of employment-to-population ratios and in labor force participation rates. American females, on the other hand, appear to be lagging behind their Canadian counterparts. Let me show you some data.

Let's begin by looking at the employment ratio for prime-age males:

As you can see, the sharp drop and subsequent recovery dynamic for prime-age males is remarkably similar across these two countries and time periods. (The initial E-P ratio was about 87% for both countries; see here).

Here is what their labor force participation rates look like:

Again, the recovery dynamic looks almost identical (The initial part rate for Canada was 93%, for the US about 91%; see here).

Alright, now let's take a look at the same statistics for prime-age females. First, the employment ratios:

These dynamics look quite a bit different. The main effect of the recession in Canada was to slow down the growth rate in the employment ratio. In the U.S., the effect has been to reduce the employment ratio, with only a very weak sign of recovering in the past year.

Here is what the labor force participation rate dynamics look like:

Again, two very different recovery dynamics.

A colleague of mine suggested that state-level layoffs in education and government may explain a good part of the lackluster recovery dynamic for U.S. females. This is certainly worth looking into. However, if we take a look at the following diagram, we see that the discrepancy appears to have happened much earlier -- around 1997, in fact.

It seems unlikely to me that the divergence between Canadian and American prime-age females is driven by cyclical considerations (although, a small part of the recent gap may be). Work incentives are likely to have changed, although what these changes were, I do not yet know. In any case, I doubt that monetary policy is a tool that can be used to close this gap. I can think of plenty fiscal interventions that might help, however.

We analyze the introduction of highly subsidized, universally accessible child care in Quebec, addressing the impact on child care utilization, maternal labor supply, and family well-being. We find strong evidence of a shift into new child care use, although some crowding out of existing arrangements is evident. Maternal labor supply increases significantly. Finally, the evidence suggests that children are worse off by measures ranging from aggression to motor and social skills to illness. We also uncover evidence that the new child care program led to more hostile, less consistent parenting, worse parental health, and lower-quality parental relationships.

Subscribe To

Favorite Quotations

"Believe those who are seeking the truth. Doubt those who find it." Andre Gide

The Democrats are the party that says government will make you smarter, taller, richer, and remove the crabgrass on your lawn. The Republicans are the party that says government doesn't work and then they get elected and prove it (P.J. O'Rourke)

But to manipulate men, to propel them toward goals which you – the social reformers – see, but they may not, is to deny their human essence, to treat them as objects without wills of their own, and therefore to degrade them (Isaiah Berlin)

I believe that sex is one of the most natural, wholesome things that money can buy (Steve Martin)

Nothing so needs reforming like other people's habits (Samuel Clemens)